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Economics

نسير نياما على قمة جبل التهديدات الـجَـسيمة

Jan 18, 2023 Nouriel Roubini

دافوس ــ يحيط بالعالم الآن حشد من "التهديدات الجسيمة" التي تعرض مستقبلنا للخطر. في حين كانت بعض هذه التهديدات تختمر منذ فترة طويلة، فإن بعضها الآخر جديد. لقد أفسح التضخم المنخفض، الذي ظل متواصلا بعناد خلال فترة ما قبل الجائحة، المجال للتضخم المفرط الارتفاع اليوم. وتحول الركود المزمن ــ النمو المنخفض الدائم بسبب ضعف الطلب الكلي ــ إلى ركود تضخمي، حيث تضافرت صدمات العرض الكلي السلبية مع التأثيرات المترتبة على السياسات النقدية والمالية المتساهلة.

في حين كانت أسعار الفائدة ذات يوم منخفضة للغاية ــ أو حتى سلبية ــ فإنها الآن في ارتفاع سريع، الأمر الذي أدى إلى ارتفاع تكاليف الاقتراض وخلق خطر اندلاع أزمات الديون المتتالية. لقد أفضى عصر العولمة المفرطة، والتجارة الحرة، ونقل التصنيع والأعمال إلى الخارج، وسلاسل التوريد التي تؤدي وظيفتها في الوقت المناسب، إلى عصر جديد من انحسار العولمة، وسياسات الحماية، وإعادة التصنيع والأعمال إلى الداخل (أو "دعم الأصدقاء")، والتجارة الآمنة، وسلاسل التوريد الزائدة عن الحاجة "على سبيل الاحتياط".

علاوة على ذلك، تعمل تهديدات جيوسياسية جديدة على زيادة مخاطر اندلاع حروب باردة وساخنة وتفتيت الاقتصاد العالمي بدرجة أكبر. كما تزايدت حدة التأثيرات المترتبة على تغير المناخ وأصبحت أسرع وتيرة من توقعات كثيرين من المراقبين. والجوائح المرضية أيضا من المرجح أن تصبح أكثر تواترا وأشد عدوى وأعظم تكلفة. ويهدد التقدم في مجالات الذكاء الاصطناعي، والتعلم الآلي، والروبوتات، والأتمتة (التشغيل الآلي) بجلب المزيد من التفاوت، والبطالة التكنولوجية الدائمة، والأسلحة الأشد فتكا التي يمكن بواسطتها شن حروب غير تقليدية. كل هذه المشكلات تعمل على تغذية ردة فعل عنيفة ضد الرأسمالية الديمقراطية، وتمكين المتطرفين الشعبويين والسلطويين والعسكريين من اليمين واليسار.

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Nouriel Roubini

Writing for PS since 2007
174 Commentaries

Nouriel Roubini, Professor Emeritus of Economics at New York University’s Stern School of Business, is Chief Economist at Atlas Capital Team, CEO of Roubini Macro Associates, Co-Founder of TheBoomBust.com, and author of MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them (Little, Brown and Company, 2022). He is a former senior economist for international affairs in the White House’s Council of Economic Advisers during the Clinton Administration and has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of NourielToday.com.

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0 Comments on this paragraph, 18 Comments on this article

Barry Rosenfeld Jan 27, 2023

A bit late to say this, but Star Trek (circa 1965) mentioned the age of dictators in the mid- 21st Century, when the character Khan (Ricardo Montalban) was introduced. Don't say we weren't warned! Lol - if one can.
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vic lai Jan 22, 2023

Even more worrying is the real long-run megathreat facing today's US, which will be caused by the country's recently cropped-up re-industrialization strive, which in turn has mainly been a result of
(i) the very fast economic and geopolitical revival of the Chinese Empire in the East in recent decades, and
(ii) the serious life-threatening disruptions to the vital global supply chains centered on China following the latest breakout of the global Covid pandemic.
But, according to a Chinese observer, the US's latest re-industrialization strive will mean the country's slow but sure, and precarious, "Brazilization" in the coming years.
Why ?
---
- vic lai Jan 22, 2023
  
  For a long time in the past, Brazil had mainly been a closed economy, where the locked-up domestic economy seldom interacted with the outside world, not importing much from the foreign countries.
  Such a protected domestic situation had caused the country's industrial productivity or external competitiveness to have kept declining relative to other open economies which have always been fiercely competing internationally with each other.
  Plainly speaking, the Brazilian people had become lazy as a result, since the country's domestic industries had no longer been competing with their most-advanced highly-productive counterparts in the foreign countries.
  No competition, no progress, this is just human nature.
  The country no longer invested large amounts of resources in her real productive economy in the form of new R&Ds and technology upgrades, leading to the gradual relative decline in her own global competitiveness.
  Initially, such decline in external competitiveness didn't hurt much, since the domestic market had still been large enough, and the government's protection had still been there.
  ---
  But over time, the external competitiveness of the country's domestic industries kept falling non-trivially relative to that of many foreign countries, since their products had become both expensive and of lower quality.
  The inevitable result had been the country's secularly-stagnating domestic economy, since the country's labor productivity had ceased to (quickly) increase over time, and so the domestic economy had fallen into the so-called Middle Income Trap.
  One day, when such an economic status quo was no longer tolerable, the domestic market was passively forced to open up to the outside world, and it was then conquered very quickly by the imported foreign goods, which were both much cheaper and of much higher quality.
  ---
  Today, many western countries led by the US decide to re-organize the global supply chains (economically and geopolitically away from China), mainly through re-shoring and re-industrialization, which simply means encircling and protecting their own domestic industries and economies, by avoiding competing directly with the fiercest competitors in the rest of the world.
  But doing so will likely prove to be the never-coming-back road to Brazil.
  ---
  - vic lai Jan 22, 2023
    
    Recently the US seems to have successfully relocated some of her ally countries' advanced energy-consuming and chips industries to her own territories, but whether those relocated industries will survive and keep prospering in the long run still remains to be seen.
    ---
    (i) The success probability of the US's intention of re-industrializing her own economy in the coming years isn't (very) high.
    (ii) If the US succeeds in re-industrializing her own economy in the coming years, she will probably walk a road similar to that of Brazil in the past.
    (iii) Even though the US will be able to avoid Brazilization in the future, the disadvantages will far outweigh the advantages, since doing so will seriously hurt one of the important linchpins of the Pax-Americana House of Cards --- US Dollar global hegemony.
    ---
    - vic lai Jan 22, 2023
      
      Suppose the US's current intention of re-industrializing her country is genuine, and she eventually succeeds much more than expected in doing so one day in the future, what will happen to the global economy then ?
      ---
      (i) The current US trade configuration of "deficit current account + surplus capital account" under Pax Americana will turn into one of "surplus current account + deficit capital account," which will resemble 19th-century Britain's trade configuration under Pax Britannica.
      Many still-developing EM countries will then have a much harder time than before to keep practicing exports-led economic growth to try to escape forever the deep poverty trap, because the economic world will no longer have a global consumer of last resort as big and reliable as the US in the good old days, and the current dominant global international-trade solar system, with the US acting as the sun and most other countries as the big and small planets constantly being attracted by and circulating around her, will eventually disintegrate into thin air.
      Even worse, the stronger the US's coming net-exporting capability, the more serious the rest of the world will be economically suppressed, resembling Britain's persistent suppression of the fast economic growth of her own trading colonies in the 19th century.
      ---
      (ii) Less and less US dollars will then be pumped out of the US to the rest of the world each year through the US's good-old trade-deficit channel, which also necessarily means less and less US-dollar-denominated FX reserves being held by the other countries, and less and less recycling-US-dollars coming back to the US domestic economy itself to help "finance" the US government's perennial annual deficit-spending.
      The US Fed can keep monetizing the US Treasury's deficit-spending in the future years, in a MMT-like manner, only when domestic inflation in the US is not acute, which is by no means guaranteed every year in the future.
      As a result, the Eurodollar (offshore US-dollar) market will start to dwindle year-in and year-out, and so will the global influence of the US government treasuries, which will be acting less and less as the most pristine collateral in that market.
      Bretton Woods II will then have to co-exist more and more with Bretton Woods III ------ the former may even be completely replaced by the latter one day in the far future.
      "My currency, your problems" will have to compete more and more with "our energies, commodities, and food, your problems," and the overall global terms of trade will tilt more and more against the DM countries and in favor of the resource-rich-and-net-exporting EM countries.
      Which means, the US in the future will have to start losing more and more foreign friends, and will no longer be able to influence foreign people as easily as before, resembling the current observation that, as a result of the US's energy self-sufficiency in recent years, today's US seems to be losing more and more good old Arabian friends in the Middle East.
      ---
      With a sun-set-like US Dollar global hegemony in the future, the more-and-more self-sufficient US may remain the richest country in the world, but her global economic, military, and geopolitical influence in the future will no longer be as big and dominant as they are today.
      ---
      - vic lai Jan 24, 2023
        
        According to the Sectoral Balance Equation (S - I)/GDP = (G - T)/GDP + (X - M)/GDP,
        If both of US's (G - T) and (X - M) remain positive and non-trivial year-in and year-out in the future, thanks to the country's unabated government deficit spending and re-industrialization-and-energy-exporting-induced surplus current account year-in and year-out, the right-hand-side injections of "water" into the country's GDP "bathtub" will be (much) greater than the left-hand-side leakage (S - I) out of the bathtub every year, which will be economically overheating for the domestic US economy and hence (highly) inflationary, especially if the country's labor participation rate continues its recent long-term falling trend.
        ---
        As time goes by, given weaker and weaker US-dollar global hegemony in the coming years, even the US herself can no longer sit comfortably at the international-trade Impossible Trinity corner of
        (1) free capital flow,
        (2) flexible exchange rate, and
        (3) independent monetary policy,
        since the US dollar will then resemble the much depreciating Euro, British pound, and the Japanese Yen in 2022, and it will similarly keep depreciating non-trivially in the global FX markets if the US Fed keeps monetizing most of the US federal government's massive new deficit spending every fiscal year.
        ---
        
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Stefan S Jan 20, 2023

Here's what to enact when we wake up: abolition of poverty, guaranteed full employment, full production and economic growth, adequate minimum wages, guaranteed income for all unable to work, a decent home for every family, modern health services for all, full educational opportunity for all, updated social welfare programs, equitable tax and money policies.
- Prashant Kotak Jan 21, 2023
  
  And Disney movies. Don't forget the Disney movies.
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vic lai Jan 20, 2023

Whether the Fed's ongoing driving-up of borrowing costs will create a much higher risk of cascading debt crises, depends to a large extent on the Fed's coming duration of higher-for-longer interest rate (and QT) policies.
If the "independent" US Fed's past interest-rate "manipulation" policies is any guide, this central bank's coming interest-rate policies may also be mainly affected by the US's every-4-year Presidential election cycle.
It's been observed by a Hongkong commentator that the Fed's interest-rate up-and-down cycle has tended to follow (or rather, to precede) a 4-year Presidential election cycle in the past 30 years or so.
---
(a) In 1994, without much inflationary pressure in the US then, Bill Clinton raised the interest rate (through the Fed), followed by the reduction of the interest rate in 1995 and Clinton's successful re-election in 1996.
Which means, believe it or not, the Fed's up-and-down interest rate manipulation has mostly been a domestic political game, and so has had nothing (much) to do with the country's CPI inflation.
(b) In 2018, without the excuse of domestic CPI inflation then, Powell's Fed also raised the interest rate, during the Presidency of Donald Trump, who appointed Republican Jerome Powell as the new Chairman of the Fed in that year.
The second year of a Presidential 4-year tenure has always been the "best" time for the Fed to raise the policy interest rate.
After 1 year or so, this will be followed by the Fed’s rate-reduction cycle, which will stimulate the domestic US economy, so that the incumbent President will be successfully re-elected for the second tenure.
Even though Powell was always criticized by President Trump at that time, and the latter even threatened to fire the former, that had all been just a show.
As expected, Powell's Fed once again lowered the policy interest rate to near-zero later, which had helped plant the seed of today's runaway inflation in the US.
Today, we all know why Donald Trump had unfortunately failed to secure a second Presidential term in Washington near the end of 2020.
---
That’s why when the US CPI inflation rate was already quite high near the end of 2021, Powell's Fed still kept insisting that the country’s inflationary pressure was just transitory.
That's why Powell Fed's only started to jerk up the policy interest rate as "late" as 2022.
That's why today’s market, represented by the Wall Street, fully aware of this kind of political game, is now widely predicting the Fed's proximate pivoting cycle later this year, to help pave the way for Biden's re-election near the end of 2024.
That's why economics should be renamed political economy (or geopolitical economy for the global economy as a whole).
---
- Just Wondering Jan 20, 2023
  
  Can you share a link to your hongkong source re the interest rate and election cycles?
  - vic lai Jan 20, 2023
    
    https://www.youtube.com/watch?v=pPQFvUNqI1w
    ---
    Starting from around 15:39
    I hope you can understand Cantonese (a dialect of the Chinese language).
    ---
    - Just Wondering Jan 20, 2023
      
      Do you happen to have a more credible source for this claim? When looking at other sources (not the raw data because I have other things to do, this interest rate-election cycle relationship has not been as you describe in the past 30 years. “ Under Volcker, Greenspan, and Bernanke, the Fed hasn’t let an election get in the way of setting monetary policy the way the Fed officials thought was appropriate.”
      
      https://www.advisorperspectives.com/commentaries/2016/08/25/fact-32-of-our-past-60-rate-hikes-were-in-election-years
      - vic lai Jan 20, 2023
        
        Rate hikes also occurred in the election years, but the resulting dampening effect on the domestic US economy almost always took effect with a certain time lag, usually long after the incumbent US President had already succeeded in securing a second tenure in Washington.
        
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- vic lai Jan 20, 2023
  
  So far as "political economy" is concerned, it seems that politics almost always trumps economics.
  ---
  (a) Domestic inflation in the US has recently been bid up quickly to a too-high level, thanks to the Fed's latest economically but not politically "too-late" rate-hiking cycle after the break-out of the pandemic in the country in 2020, as described upstairs.
  (b) The US has kept tearing down the world's highly-efficient and least-costly global supply chains centered previously on China, and has been trying hard to replace it with more costly trade-deglobalization, re-manufacturing in the US in the coming years (at very high domestic labor costs, unless mostly replaced by AI-powered full-automations and robots), re-shoring or friend-shoring, semiconductor and other technology restrictions on China, and current economic sanctions of all kinds on Russia.
  (c) Most EU countries today have all stopped buying energies (and food) very cheaply from neighboring Russia outright, and have instead chosen to import much more expensive LNG and other energies from the US and other friendly countries (and also to construct the required very expensive energy-delivering intercontinental infrastructure facilities), now and in the foreseeable future.
  ---
  Perhaps good (geo-)politics, but (very) bad economics.
  ---
  - vic lai Jan 20, 2023
    
    Well, this time may be different.
    According to Jerome Powell, "the historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done."
    ---
    On the other hand, if this time isn't different, and the US every-4-year Presidential election cycle just mentioned remains more or less applicable in the near future, then the 2020s may possibly repeat the inflation history of the 1970s, with not only one round but several rounds of peaking inflations in the US in the current decade, ultimately requiring the US Fed to have to lift the policy interest rate to an astronomical level before the inflation monster can be fully tamed in the country, as have recently been claimed by "King Predictor" Michael Burry, and Charlie Munger.
    ---
    https://www.youtube.com/watch?v=f5j525KpdGc
    ---
    - vic lai Jan 21, 2023
      
      Even much more important than the current "for or against the Fed's higher-for-longer interest-rate hiking policy" arguments is the fact that, contrary to the claims of Larry Summers et al, the Fed's good old but now anachronistic inflation target of 2% should suitably be amended to say 4%, so that in the future, during the Fed's job of fighting domestic inflation in the US, her policy interest rate won't be raised to a too high level, and won't last for too long, before her now-easier inflation-fighting mission has fully been accomplished (4% instead of 2%), and hence the resulting recessionary pressure on the US economy (and on the rest of the world) will be (much) mitigated.
      ---
      https://www.youtube.com/watch?v=16t5euZS-Jw
      ---
      - vic lai Jan 22, 2023
        
        The US dollar's latest non-trivial weakening in the global FX market should have been a result of
        (i) the market's current widespread expectation of the US Fed's near-termination of her recent higher-for-longer rate-hiking cycle, and the resulting unwinding of international carry trades between the strengthening US dollar and other weakening major foreign currencies,
        (ii) the Euro's relative strengthening as a result of the ECB's more aggressive catching-up rate-hiking cycle in the European Continent, to help fight runaway domestic inflation and capital flights there,
        (iii) the US's "discouraging" the Bank of Japan from keeping net-selling US treasuries in the market to help raise US dollars which were to be sold in the market to support the quickly-weakening Japanese Yen last year, thereby helping to mitigate the liquidity shortage in the US treasury market (which in turn had once prompted Janet Yellen to have suggested "Treasury QE").
        ---
        But the latest re-weakening of the US dollar, contrary to the much strengthening US dollar in the early 1980s, will prevent today's US from starting and enforcing Plaza Accord II in the near future to force China's yuan to massively appreciate in the rest of the 2020s, thereby failing to further weaken China's status as the World's Factory, and the world's biggest net-exporter, in the foreseeable future.
        Unless the repeated rounds of 1970s-like "inflation re-awakening" also occur in the 2020s, and the resulting astronomical interest rate in the US eventually results in Plaza Accord II against China, that is.
        ---
        
        vic lai Jan 22, 2023
        
        We all know what a "nuclear terrible balance" between the world's very few nuclear-weapon-owning countries is.
        A similar "economic terrible balance" between the US and China has also been established in the past decades (until recently), during which
        (a) the US has been importing very cheap goods and recycling-capital from China, and
        (b) China has been relying much on both the very big US domestic market and US's high technology for her exports-led fast economic growth.
        Like the breaking of the nuclear terrible balance, any breaking of such economic terrible balance between the two superpowers will mean that both countries will be seriously hurt as a result.
        ---
        Around 20 years ago, Larry Summers (together with a US Senator) already suggested to then US President George W. Bush the following 3 points, to try to mitigate or solve the above economic terrible balance :
        (i) Forced China's yuan to appreciate (en masse), to force up the foreign prices of China-made goods, and hence to much weaken the foreign competitiveness of China's exports.
        Doing so could strengthen the exports of other developing countries, so that they could help limit and balance the great exporting power of China.
        China's increasingly owned US treasuries, as a result of her perennial trade surpluses, would also drop significantly in value when measured in appreciating yuan.
        (ii) Stopped the US's tax-cutting policies, and raised the US tax rates, which could increase the US government's tax revenues, to help mitigate the country's fiscal deficits and remaining fiscal debts before the arrival of the next financial crisis.
        Also, encouraged the US households to increase their savings rate, so that the US households could have a longer grace period to more easily cope with the aftermath of the eventual breaking out of a new financial crisis in the country.
        (iii) Started a suitable level of reverse-globalization or deglobalization, so that some middle- and low-tech industries in other countries would migrate back to the US.
        Doing so could increase the job opportunities of the US's blue-collar workers, and could suitably reduce the heavy reliance of the US consumers on made-in-China merchandizes of all kinds, thereby helping resuming the US's trade surpluses in the following years.
        ---
        From today's viewpoint, those suggestions of Summers were both prescient and to the point.
        Unfortunately for the US, President Bush ignored Summers's ideas, since he thought that,
        (a) the US's last enemy country, Japan, had failed to dethrone the US afterall, and so China would not be different.
        (b) the economic terrible balance between the US and China had always been an unbalanced one, tilting in favor of the US and against China.
        This was because China couldn't sell all of her owned US treasuries to the market all at once without much lowering her resultant overall selling revenues (measured in US dollar).
        Not only would China not sell her US treasuries en masse, she would also even try hard to maintain the value of US treasuries, so as to sustain the value of her own precious FX reserves (which were mostly in the form of US treasuries).
        As a result, according to Bush, the US economy would always remain very safe.
        ---
        
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